non-repayable basis under section 23 of the Arms Export Control Act 647 shall be priced to exclude the costs of salaries of members of the Armed Forces of the United States (other than the Coast Guard),647

(b) In addition to such other terms and conditions as the President may determine pursuant to subsection (a), defense articles may be loaned thereunder only if

(1) there is a bona fide reason, other than the shortage of funds, for providing such articles on a loan basis rather than on a grant basis;

(2) there is a reasonable expectation that such articles will be returned to the agency making the loan at the end of the loan period unless the loan is then renewed;

(3) the loan period is of fixed duration not exceeding five years, during which such article may be recalled for any reason by the United States;

(4) the agency making the loan is reimbursed for the loan based on the amount charged to the appropriation for military assistance under subsection (c); and

(5) 648 the loan agreement provides that (A) if the defense article is damaged while on loan, the country or international organization to which it was loaned will reimburse the United States for the cost of restoring or replacing the defense article, and (B) if the defense article is lost or destroyed while on loan, the country or international organization to which it was loaned will pay to the United States an amount equal to the replacement cost (less any depreciation in the value) of the defense article.

(c)(1) In the case of any loan of a defense article or defense service made under this section, there shall be a charge to the appropriation for military assistance for any fiscal year while the article or service is on loan in an amount based on

(A) the out-of-pocket expenses authorized to be incurred in connection with such loan during such fiscal year; and

(B) the depreciation which occurs during such year while such article is on loan.

(2) The provisions of this subsection shall not apply—

(A) to any particular defense article or defense service which the United States Government agreed, prior to the date of enactment of this subsection, to lend; and

(B) to any defense article or defense service, or portion thereof, acquired with funds appropriated for military assistance under this Act.

647 The last sentence of par. (3) was added by sec. 123(a) of the International Security and Development Cooperation Act of 1985 (Public Law 99-83; 99 Stat. 205). The language "or from funds * ** Act" and "(other than the Coast Guard)" was added by Sec. 586(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1989 (Public Law 100461; 102 Stat. 2268), to become effective on October 1, 1989.

648 Par. (5) was amended and restated by sec. 109(c) of the International Security and Development Cooperation Act of 1981 (Public Law 97-113; 95 Stat. 1536). It formerly read as follows: "(5) arrangements are made with the agency making the loan to be reimbursed in the event such article is lost or destroyed while on loan, such reimbursement being made first out of any funds available to carry out this chapter and based on the depreciated value of the article at the time of loss or destruction.".

Sec. 504.649 Authorization.-(a) 650 (1) There are authorized to be appropriated to the President to carry out the purposes of this chapter $805,100,000 for the fiscal year 1986 and $805,100,000 for the fiscal year 1987.

(2) Amounts appropriated under this subsection are authorized to remain available until expended.

(b) In order to make sure that a dollar spent on military assistance to foreign countries is as necessary as a dollar spent for the United States military establishment, the President shall establish procedures for programing and budgeting so that programs of military assistance come into direct competition for financial support with other activities and programs of the Department of Defense. Sec. 505.651 Conditions of Eligibility. (a) In addition to such other provisions as the President may require, no defense articles or related training or other defense service 652 shall be furnished to any country on a grant basis unless it shall have agreed that(1) it will not, without the consent of the President

(A) permit any use of such articles or related training or other defense service 652 by anyone not an officer, employee, or agent of that country,

(B) transfer, or permit any officer, employee, or agent of that country to transfer such articles or related training or other defense service 652 by gift, sale, or otherwise, or

(C) use or permit the use of such articles or related training or other defense service 652 for purposes other than those for which furnished;

(2) it will maintain the security of such articles or related training or other defense service,652 and will provide substantially the same degree of security protection afforded to such articles or related training or other defense service 652 by the United States Government;

(3) it will, as the President may require, permit continuous observation and review by, and furnish necessary information to, representatives of the United States Government with regard to the use of such articles or related training or other defense service; 652 and

(4) unless the President consents to other disposition, it will return to the United States Government for such use or disposition as the President considers in the best interests of the United States, such articles or related training or other defense

649 22 U.S.C. 2312.

650 Subsec. (a) was amended and restated by sec. 103 of the International Security and Development Cooperation Act of 1985 (Public Law 99-83; 99 Stat. 195).

Authorizations under sec. 504 in recent years included the following: fiscal year 1977$235,000,000; fiscal year 1978-$228,900,000; fiscal year 1979-$133,500,000; fiscal year 1980$110,200,000; fiscal year 1981-$106,100,000; fiscal year 1982-$238,500,000; fiscal year 1983$238,500,000; fiscal year 1984-$639,700,000; fiscal year 1985-no authorization; fiscal years 1988 through 2002-no authorization.

Sec. 587(c) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1993 (Public Law 102-391; 106 Stat. 1689), provided the following:

"(c) of the funds made available (including earmarked funds) in Public Law 101-513 and prior Acts making appropriations for foreign operations, export financing, and related programs to carry out the provisions of section 23 of the Arms Export Control Act and section 503 of the Foreign Assistance Act of 1961, $45,750,000 are rescinded.".

651 22 U.S.C. 2314. Former sec. 506 was redesignated sec. 505 by sec. 201(e) of the FA Act of 1967.

652 Sec. 203(b) of the International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329; 90 Stat. 735) added "or related training or other defense service".

service 652 which are no longer needed for the purposes for which furnished.

(b) No defense articles shall be furnished on a grant basis to any country at a cost in excess of $3,000,000 in any fiscal year unless the President determines

(1) that such country conforms to the purposes and principles of the Charter of the United Nations;

(2) that such defense articles will be utilized by such country for the maintenance of its own defensive strength, or 653 the defensive strength of the free world;

(3) that such country is taking all reasonable measures, consistent with its political and economic stability, which may be needed to develop its defense capacities; and

(4) that the increased ability of such country to defend itself is important to the security of the United States.

(c) 654 The President shall regularly reduce and, with such deliberate speed as orderly procedure and other relevant considerations, including prior commitments, will permit, shall terminate all further grants of military equipment and supplies to any country having sufficient wealth to enable it, in the judgment of the President, to maintain and equip its own military forces at adequate strength, without undue burden to its economy.

(d) 654, 655 (1) Assistance and deliveries of assistance under this chapter to any country shall be terminated as hereinafter provided, if such country uses defense articles or defense services furnished under this Act, the Mutual Security Act of 1954,656 or any predecessor Foreign Assistance Act, in substantial violation (either in terms of quantities or in terms of the gravity of the consequences regardless of the quantities involved) of any agreement entered into pursuant to any such Act (A) by using such articles or services for a purpose not authorized under section 502 or, if such agreement provides that such articles or services may only be used for purposes more limited than those authorized under section 502, for a purpose not authorized under such agreement; (B) by transferring such articles or services to, or permitting any use of such articles or services by, anyone not an officer, employee, or agent of the recipient country without the consent of the President; or (C) by failing to maintain the security of such articles or services.

(2)(A) Assistance and deliveries of assistance shall be terminated pursuant to paragraph (1) of this subsection if the President so determines and so states in writing to the Congress, or if the Congress so finds by joint resolution.

(B) The President shall report to the Congress promptly upon the receipt of information that a violation described in paragraph (1) of this subsection may have occurred.

653 Sec. 201(b) of the FA Act of 1971 substituted "or" in lieu of "and". 654 Subsecs. (c) and (d) were added by sec. 201(a) of the FA Act of 1962.

655 Sec. 304(a) of the International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329; 90 Stat. 751) amended subsec. (d) which formerly read as follows:

"(d) Any country which hereafter uses defense articles or defense services furnished such country under this Act, the Mutual Security Act of 1954, as amended, or any predecessor foreign assistance Act, in substantial violation of the provisions of this chapter or any agreements entered into pursuant to any of such Acts shall be immediately ineligible for further assistance.". 656 For text, see Legislation on Foreign Relations Through 2001, vol. I-B.

(3) Assistance to a country shall remain terminated in accordance with paragraph (1) of this subsection until such time as— (A) the President determines that the violation has ceased; and

(B) the country concerned has given assurances satisfactory to the President that such violation will not recur.

(4) The authority contained in section 614(a) of this Act may not be used to waive the provisions of this section with respect to further assistance under this chapter.

(e) 6

657 In considering a request for approval of any transfer of any weapon, weapons system, munitions, aircraft, military boat, military vessel, or other implement of war to another country, the President shall not give his consent under subsection (a)(1) or (a)(4) to the transfer unless the United States itself would transfer the defense article under consideration to that country.658 In addition, the President shall not give his consent under subsection (a)(1) or (a)(4) to the transfer of any significant defense articles on the United States Munitions List unless the foreign country requesting consent to transfer agrees to demilitarize such defense articles prior to transfer, or the proposed recipient foreign country provides a commitment in writing to the United States Government that it will not transfer such defense articles if not demilitarized, to any other foreign country or person without first obtaining the consent of the President.

(f) 657 Effective July 1, 1974, no defense article shall be furnished to any country on a grant basis unless such country shall have agreed that the net proceeds of sale received by such country in disposing of any weapon, weapons system, munition, aircraft, military boat, military vessel, or other implement of war received under this chapter will be paid to the United States Government and shall be available to pay all official costs of the United States Government payable in the currency of that country, including all costs relating to the financing of international educational and cultural exchange activities in which that country participates under the programs authorized by the Mutual Educational and Cultural Exchange Act of 1961.659 In the case of items which were delivered prior to 1985,660 the President may waive the requirement that such net proceeds be paid to the United States Government if he determines that to do so is in the national interest of the United States.661

657 Former subsec. (e), which related to conditions of eligibility, was repealed by Public Law 92-226. New subsecs. (e) and (f) were added by sec. 12(3) of the FA Act of 1973.

658 Sec. 204(b)(2) of the International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329; 90 Stat. 735) amended sec. 505(e) by striking out the following words after "country": ", and prior to the date he intends to give his consent to the transfer, the President notifies the Speaker of the House of Representatives and the Committee on Foreign Relations of the Senate in writing of each intended consent, the justification for giving such consent, the defense article for which he intends to give his consent to be so transferred, and the foreign country to which that defense article is to be transferred".

659 For text, see Legislation on Foreign Relations Through 2000, vol. II, sec. E.

660 Title III of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1991 (Public Law 101-513; 104 Stat. 1998), struck out "1975" and inserted in lieu thereof "1985".

661 The last sentence of par. (f) was added by sec. 123(b) of the International Security Cooperation and Development Act of 1985 (Public Law 99-83; 99 Stat. 205).

(g) 662 (1) It is the policy of the United States that no assistance under this chapter should be furnished to any foreign country, the laws, regulations, official policies, or governmental practices of which prevent any United States person (as defined in section 7701(a)(30) of the Internal Revenue Code of 1954) from participating in the furnishing of defense articles or defense services under this chapter on the basis of race, religion, national origin, or sex. (2)(A) No agency performing functions under this chapter shall, in employing or assigning personnel to participate in the performance of any such function, whether in the United States or abroad, take into account the exclusionary policies or practices of any foreign government where such policies or practices are based upon race, religion, national origin, or sex.

(B) Each contract entered into by any such agency for the performance of any function under this chapter shall contain a provision to the effect that no person, partnership, corporation, or other entity performing functions pursuant to such contract, shall, in employing or assigning personnel to participate in the performance of any such function, whether in the United States or abroad, take into account the exclusionary policies or practices of any foreign government where such policies or practices are based upon race, religion, national origin, or sex.

(3) The President shall promptly transmit reports to the Speaker of the House of Representatives and the chairman of the Committee on Foreign Relations of the Senate concerning any transaction in which any United States person (as defined in section 7701(a)(30) of the Internal Revenue Code of 1954) is prevented by a foreign government on the basis of race, religion, national origin, or sex, from participating in the furnishing of assistance under this chapter, or education and training under chapter 5, to any foreign country. Such reports shall include (A) a description of the facts and circumstances of any such discrimination, (B) the response thereto on the part of the United States or any agency or employee thereof, and (C) the result of such response, if any.

(4)(A) Upon the request of the Committee on Foreign Relations of the Senate or the Committee on Foreign Affairs 663 of the House of Representatives, the President shall, within 60 days after receipt of such request, transmit to both such committees a statement, prepared with the assistance of the Assistant Secretary of State for Democracy, Human Rights, and Labor,664 with respect to the country designated in such request, setting forth—

(i) all the available information about the exclusionary policies or practices of the government of such country when such

662 Subsec. (g) was added by sec. 302(a) of the International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329; 90 Stat. 751).

663 Sec. 1(a)(5) of Public Law 104-14 (109 Stat. 186) provided that references to the Committee on Foreign Affairs of the House of Representatives shall be treated as referring to the Committee on International Relations of the House of Representatives. Previously, sec. 9(a)(6) of the U.S.C. Technical Amendments (Public Law 103-437; 108 Stat. 4588) struck out "International Relations" and inserted in lieu thereof "Foreign Affairs".

664 Sec. 162(e)(2) of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995 (Public Law 103-236; 108 Stat. 405), changed this title designation by striking "Human Rights and Humanitarian Affairs" and inserting lieu thereof "Democracy, Human Rights, and Labor". Previously, sec. 109(a)(4) of the Foreign Relations Authorization Act, Fiscal Year 1978 (Public Law 95-105; 91 Stat. 846) changed the title designation from "Coordinator for Human Rights and Humanitarian Affairs" to "Assistant Secretary of State for Human Rights and Humanitarian Affairs".